Digital Trends – WHY ISN’T THE DIGITAL ECONOMY MAKING LIFE BETTER?

When City University of New York professor (and Digital Trends contributor) Douglas Rushkoff skimmed the Wall Street Journal a few years ago, he couldn’t help but mutter two words upon seeing Twitter CEO Evan Williams’ $4.3 billion company earnings: he’s screwed. Except he used more colorful words.

Why the disdain for a company that just went public and now annually brings in around $2 billion?

Because now it can never stop growing, Rushkoff explained during his keynote speech at this year’s WebVisions conference in Portland, Oregon. While Twitter may generate around $2 billion each year, Wall Street considers the app a failure if that number doesn’t go up year after year after year. As CEO, Williams needs to continue to grow a service – sending 140-character messages – that has likely reached its peak. As he put it, Wall Street always wants more; “there’s no such thing as enough, you can’t stop.”

That problem, and others that spiral out from it, are the topic of Rushkoff’s latest book, Throwing Rocks at the Google Bus.

To Rushkoff, the constant corporate requirement to grow is not just hurting the digital economy, but destroying the planet itself. Sure, digital technology allows for transparency, but it also tends to accelerate and amplify the shortcomings of corporations. Today, companies aren’t necessarily created in order to generate revenue but rather, to get snapped up by bigger companies.

Furthermore, startups aren’t optimized to create sustainable marketplaces or even to do business. Instead, they’ve been optimized for value extraction while consistently externalizing as much development (i.e. human cost) as possible. So how do entrepreneurs break this vicious cycle?

“It’s a better business strategy,” Rushkoff told Digital Trends. “The whole trick is trying to help young developers understand how to make money for themselves; how to do business. It’s not about being generous or leftist. It’s about doing better business, having more long-term proceeds and revenues, [and] really old fashioned things like making money by selling goods and services.”

Perhaps it really is that easy. Rushkoff acknowledges that there certainly isn’t a lack of good ideas, the problem is entrepreneurs losing sight of them. Once money-grubbing investors enter the fray, dangle billions of dollars in front of them, then snatch up the brand to fulfill their own motives, sustainable profitability goes out the window.

“The share price comes to matter more than the company or product or software,” Rushkoff says. “Share price and actual business prosperity have become disconnected. If developers resisted the temptation to sell their business to venture capital (or even just resisted the wrong VC) then they would be free to develop their business to be profitable. It’s a much higher probability win than becoming a multi-billion-dollar company, too.”

Rather than enrich consumers to keep them coming back, many modern companies are positioned to kill competition and create monopolies. Take a company like Uber, for instance. According to Rushkoff, Uber co-founder Travis Kalanick didn’t start the popular ride-share company to answer the question of, “How can we create a sustainable taxi future?” Instead, Uber exists to create such a monopoly in ride sharing that allows it to leverage that position into a separate vertical. Unfortunately, this doesn’t make riders rich at all; it hardly even makes its drivers rich.

To truly achieve profitability when it comes to a company like Uber, Rushkoff says a worker-owned platform is the best method. But could a worker-owned ride share program actually prove competitive against a behemoth like Uber?

“There are a few in the running right now, from Juno in New York to Lazooz, based in New Zealand,” Rushkoff said. “We’ll have to see if they can compete [but] Uber’s war chest makes it easy for them to undercut the prices of anyone else. Uber doesn’t have to make money; it simply has to kill competition, the way Walmart does. It’s going to be interesting to see if drivers are able to forge some solidarity, and move en masse to better services.”

Though a company like Uber dates this problem with the digital economy as something that’s only recently occurred, Rushkoff recalls two instances prior to 2001 which served as a sort of “aha moment.” The first dates all the way back to 1995; Netscape goes public on the very same day Grateful Dead frontman Jerry Garcia died. To him, “it felt like the original San Francisco ethos of the ‘net died that day.”

The second happened several years later in 2000, when AOL bought Time Warner. In an op-ed he wrote for the New York Times, Rushkoff reasoned that AOL had reached a peak, that it was at a point where it was cashing in “inflated chips” before collapsing. He perceived the dotcom boom nearing its bust, too. Except the New York Times wouldn’t publish the story.

“No one believed me, and they wouldn’t publish the piece,” Rushkoff explained. “That was even scarier to me. And, of course, two months later the internet stocks all crashed. I could see how the digital economy was actually working, with companies looking at their shares as their real products, and pivoting all over the place to extract value from the real world, and stuff it into their share price.”

Recognizing the problem is one thing; employing a solution is something else entirely. Mitigating extraction, steering clear from the monopoly mindset, and optimizing platforms for the velocity of exchange are all perfectly viable places to start, according to Rushkoff. Businesses must understand that their users aren’t merely consumers but producers and value creators.

Although society is currently entrenched in the Digital Age, it doesn’t mean it should stray from actually making something and creating value for it. To achieve a sustainable digital economy that cares more about making its users rich than capital gains, the externalization of development must cease. Services like eBay, Vimeo, Slack, Kickstarter, or Dropbox are all perfect examples of companies uninterested in monopolies and focused on connecting people and creating value.

“If you make your users rich, they will like your service and come back to it,” Rushkoff told the captivated WebVisions audience. “This is how you create a business that will actually function in the traditional sense and make money.”

Douglas Rushkoff is the author of Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity, as well as a dozen other bestselling books on media, technology, and culture, including Present Shock, Program or Be Programmed, Media Virus, Life Inc and the novel Ecstasy Club. He is Professor of Media Theory and Digital Economics at CUNY/Queens. He wrote the graphic novels Aleister & Adolf, Testament, and A.D.D., and made the television documentaries Generation Like, Merchants of Cool, The Persuaders, and Digital Nation. He lives in New York, and lectures about media, society, and economics around the world.